Banks’ overseas funding still a problem with balance of payments

The Council of Trade Unions welcomed an improvement in New Zealand’s International Investment Position, but noted that banks’ overseas debt comprised three quarters of our net international liabilities.

“It appears that the Reserve Bank has been successful in beginning to wean the Big Four Australian owned banks off their short term borrowing habits, but not so successful in reducing their dependence on overseas funding,” said CTU Economist Bill Rosenberg. “That makes it more difficult for the Reserve Bank to control monetary conditions. The Reserve Bank should be considering more direct actions to control the banks’ overseas borrowing.”

Rosenberg cites the example of South Korea’s recent restrictions on the use of foreign currency loans and regulation on banks’ short term borrowing.

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